Dearman, a former investment adviser, and Gray are said to have squandered money—taken from more than 30 of Dearman’s advisory clients—in gambling, personal expenses, and in Ponzi payments to other investors from approximately December 2008 through August 2012. According to the SEC complaint, filed in the U.S. District Court in Tulsa, Oklahoma, Dearman invested his clients in various businesses that Gray owned in Bartlesville, Oklahoma. At the time, Dearman was working as an investment adviser in Bartlesville.
Dearman and Gray misled investors about the safety of the investments and how their funds would be used. They were told in some cases that funds would be used to purchase equipment for Bartnet Wireless Internet, Inc., one of Gray’s companies. But in fact, Gray and Dearman squandered the vast majority of investor funds on gambling, personal expenses, and Ponzi payments. The complaint also alleges that Dearman stole roughly $700,000 from some of his clients through various ruses.
The complaint said that Dearman and Gray were able to lure these clients in part because many of them had known him and his family since childhood, thought of him as an active member of their church, and knew him as a popular local wedding singer.
Gray played a vital role in virtually every aspect of the fraudulent scheme that involved her company, Bartnet Wireless Internet Inc. All the money raised for Bartnet went into a bank account she controlled. Gray was the contact person for the self-directed IRA custodians used to house the Bartnet investments. She was also fully aware that Bartnet was operating at a loss and would be insolvent without the continuous infusion of new investor funds. In 2010 Gray obtained a $250,000 credit line from a bank for Bartnet, supposedly for Bartnet’s growth and the purchase of towers.
Dearman and Gray allegedly violated or aided and abetted Securities Act and Investment Advisers Act violations, and the SEC seeks permanent injunctive relief, disgorgement plus prejudgment interest, and civil monetary penalties from both defendants.
In addition, the Commission has named as relief defendants three of Gray’s businesses, including Bartnet Wireless Internet, The Property Shoppe Inc., and Quench Buds Holding Company LLC, seeking to recover funds they derived as a result of Gray’s and Dearman’s fraud. According to the SEC’s complaint, The Property Shoppe is a shell company with no employees or operations.
The SEC complaint is here.